The uneasy wait for inclusion in the ring of power

Date: November 10 2012

Jill Treanor

The Goldman circle will expand its numbers next week in a dial-tone ritual.

THE phone call lasts just a few seconds. The words ''congratulations, you've become a partner'', are just about all Goldman Sachs boss Lloyd Blankfein will have time to say to the 75 or so high-flyers he will ring next Wednesday to invite into one of the most prestigious and lucrative cliques on Wall Street.

It is a day of huge expectation for individuals in time zones from Melbourne to New York who are waiting to hear that they have been given a role for which there is no job advert and no interview.

The whittling down of the candidates is under way this week in Goldman Sachs' head office in New York. Over several days, a team of partners led by Michael ''Woody'' Sherwood are deciding upon whom to bestow the glittering title of Goldman Sachs partner.

The decision comes at the end of a thorough, secretive decision-making process that happens only every two years. This year's deliberations began in the northern hemisphere summer and include the selection of managing directors, one rung below partnership.

With the title of partner comes prestige that is, arguably, unrivalled in the financial world. It also brings vast wealth in the form of a partnership bonus pool that pays out millions of dollars each year. And it opens the door to high-profile career moves: former US Treasury secretary Henry Paulson was in the golden circle, as was one-time BBC chairman Gavyn Davies. More locally, shadow communications spokesman Malcolm Turnbull was a chairman of the Australian arm of Goldman Sachs.

Annual payouts can reach tens of millions of dollars each on top of salaries that are believed to start at almost $US1 million. Blankfein, for instance, took home $US16 million last year, according to Forbes, though he got $US68.5 million in 2007.

To be selected, candidates must have survived a process known as ''cross-ruffing'', a term borrowed from the card game bridge. Insiders describe it as a rigorous cross-checking procedure that involves teams of Goldman partners interviewing each other about potential candidates. The individuals being cross-ruffed are, in theory, unaware that their strengths and weaknesses are being scrutinised. They are not interviewed.

But in reality, the hierarchical nature of the firm means that anyone with any ambition will be aware they are next in line for promotion, and William D. Cohan, a former US banker who authored a book about Goldman called Money and Power, said the selection procedure was ''an incredible endurance test on one hand and incredibly anxiety-inducing on the other''.

The Goldman hierarchy is rigid. General graduates are hired as analysts while business school graduates come in as associates. The next rung is vice-president - the level attained by disgruntled former employee Greg Smith, who has just written a book about the hard-nosed culture of the bank. This is known as executive director in Australia. Then comes managing director - there are hundreds of these - and, on the highest rung, partner managing director.

This year, 33 partners have departed, leaving the total at 407 before the new crop - or ''class'' as Sherwood describes them - are appointed next week. Those who leave the partnership - often only in their late 40s and early 50s - go on to other careers, retire or stay on as advisory or senior directors. Some even join the board, such as is the case of outgoing chief financial officer David Viniar.

In 2010, Blankfein made 110 calls. This year he may not spend so much time on the phone: the precise number of new appointments is still being worked on, but at a time when the firm has been cutting staff, it is likely that the 2012 ''class'' will be fewer than 100, with speculation that between 75 and 100 Goldman bankers will make the grade.

GUARDIAN

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